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The Economics of the Phone

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Mobile Phones and Development in Africa

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Abstract

This chapter offers an overview of information technology’s role in development, examining its various functions, applications, and impacts. The cost-benefit analysis of adopting mobile phones and their functionalities is discussed, as well as the relationship between network size and technology utility. A framework is presented to analyze the technology’s impact, considering market failures that may constrain it. The chapter cautions against viewing information technology as a “silver bullet” for development and highlights the need to consider adoption, usage, and impact constraints. The chapter concludes by outlining how information technology can address market failures and improve development outcomes.

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Notes

  1. 1.

    The World Bank, “Sustainable Energy for All” database is from the Sustainable Energy for All Global Tracking Framework led jointly by the World Bank, International Energy Agency, and the Energy Sector Management Assistance Program. While 85% of the world’s population has access to electricity, electricity access ranges from 20 to 80% across countries (World Bank Sustainable Energy for All database).

  2. 2.

    We also consider digital technologies to be network goods, namely, goods whose socio-economic impact increases with the number of users (Björkgeren, 2019; Katz & Shapiro, 1985, 1994).

  3. 3.

    While we may think of digital technology or infrastructure as generating positive spillovers, we can also cite examples of negative spillovers. For example, investment in the road network reduces transaction costs, improves access to basic services, and—in theory—should increase market efficiency, but could simultaneously stimulate higher demand for cars and increase pollution.

  4. 4.

    “Imperfect information can also affect a government’s ability to finance the provision of public services. If governments are unable to identify consumers’ preferences and willingness to pay for such services, it can be difficult to determine their optimal provision. This, in turn, makes it more challenging to design tax schemes to fund public goods. Even if consumers’ preferences could be revealed, an additional question is whether tax schemes could be effectively enforced, thus further reducing the financing mechanisms available to finance public goods” (Aker, 2017).

  5. 5.

    This reduction in search costs does not necessarily require an outside intermediary—such as a webpage, or information clearinghouse—to facilitate information-sharing. Rather, it can rely upon individuals’ existing social and commercial networks.

  6. 6.

    For example, while radios can be used across all segments of the population, they generally provide a limited range of information. In addition, newspapers are primarily concentrated in urban areas, are expensive, and are inaccessible to illiterate populations. Approximately 1 in 5 individuals in sub-Saharan Africa read a newspaper at least once per week, with a much smaller share in rural areas (Aker & Mbiti, 2010). Estimates of ownership of a television set range considerably, from 30 to 70%, primarily driven by ownership in North and South Africa.

  7. 7.

    The concept of “information overload” suggests that too much information makes decision-making difficult and causes stress. Behavioral scientists argue that bounded rationality—the idea that we make rational decisions within the constraints of time, available information, and brain power—helps us to find shortcuts to information overload and make decisions that satisfy us. This can lead to second-best decisions, rather than optimal decisions.

  8. 8.

    “A key distinction between goods made of atoms and goods made of bits is that bits are non-rival, meaning that they can be consumed by one person without reducing the amount or quality available to others” (Goldfarb & Tucker, 2019).

  9. 9.

    Users can also use the balances of their m-money accounts to pay for public utilities such as electric and municipal water services (Lashitew et al., 2019), as well as to pay employee salaries, pensions, and social protection program benefits (Aker et al., 2016; Akinyemi & Mushunje, 2020;).

  10. 10.

    Among these 13 countries, 4 were West African countries: Benin, Burkina Faso, Côte d’Ivoire, and Ghana.

  11. 11.

    While there is a substantial economics literature on trust and information provision in general (Markiewicz & Adamus, 2013; Shapiro et al., 1999; Tu & Bulte, 2010), there is relatively less literature on how trust affects the way in which agricultural information provision is received and interpreted. Adegbola and Gardebroek (2007) and Moser and Barrett (2006) study how farmers learn about agricultural technologies from agricultural extension agents and community farmers, and find differences in adoption depending upon the information source. Sociological and anthropological research yields similar findings.

  12. 12.

    A related issue is the type of information provided. For example, in agriculture, while price information is arguably the most frequently offered type of information service, other types of information may be under-recognized. For example, Burrell and Oreglia (2015) find that fisherman needed timely updates about travel delays between fishermen and traders, as well as the need for ice and fuel. Fabregas et al. (2021) find that farmers demand detailed information about their plots, soil quality, etc. in order to make the most optimal choices.

  13. 13.

    Intermediated use of digital is the practice of relying upon the skills of another person to operate an ICT as a way to overcome a lack of requisite skill.

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    Jenny C. Aker

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    Joël Cariolle

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Aker, J.C., Cariolle, J. (2023). The Economics of the Phone. In: Mobile Phones and Development in Africa. Palgrave Studies in Agricultural Economics and Food Policy. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-41885-3_3

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